ME Bank branches out to the workplace

ME Bank chief executive Jamie McPhee will discuss the lender’s credit rating with Standard & Poor’s early this week following the decision by the agency to downgrade the long-term ratings of the major Australian banks.

Mr McPhee rejected suggestions ME Bank would automatically be downgraded, because it was changing its funding model and had raised its deposit base in recent months.

“We are changing our business model. That might help to mitigate a potential downgrade," he said.

Last Thursday, S&P downgraded the ratings of ANZ Banking Group, Westpac, National Australia Bank and ­Commonwealth Bank from AA to AA- following a controversial review of the world’s biggest banks.

Mr McPhee, who joined the lender in February last year from Bendigo and Adelaide Bank, added that although the bank’s BBB/A2 rating was important, it was not critical because ME Bank does not borrow money in wholesale markets.

About 50 per cent of its funding comes from depositors. The remainder is financed through the securitisation markets, where credit ratings are based on the quality of the mortgages that undepin a security, rather than a bank’s creditworthiness.

He said the bank was keeping a close eye on the European debt crisis, which is inflicting havoc on credit markets, but noted ME Bank did not expect to have to raise finance until April.

It secured $665 million two months ago.

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ME Bank is in the midst of changing its distribution strategy, a move that it hopes will lift its share of the mortgage market to 5 per cent from 1.5 per cent in five years and give it one of the biggest branch networks in Australia.

ME Bank is owned by 32 industry retirement schemes, through which it has close union ties. A key plank of the strategy is to capitalise on this support base by opening branches in the workplace rather than on high streets or in shopping centres.

Having established the first workplace site at a OneSteel plant in Laverton, Victoria, in July, the group now has a presence in 10 workplaces, including three construction sites, a Melbourne office tower and the offices of super administration company SuperPartners. The opening times of the outlets, which typically offer home loans, ­personal loans, credit cards, savings products and transaction accounts but do not accept cash, vary in accordance with the operating hours of the ­workforce.

Mr McPhee said the workplace outlets had generated a great deal of interest from a variety of companies.

The strategy also includes a plan to distribute home loans through brokerages and, to that end, ME Bank last week started selling mortgages through National Mortgage Brokers.

In time it plans to sign up 10 mortgage aggregators.

McMcPhee said the bank had no plans to open more outlets on the high street and might consider closing part of its 13-strong high street branch network.

“We need to work out if the 13 branches are profitable," he said.

ME Bank also intends to build its direct channels, including telephone, internet and mobile banking, and increase the number of mobile bankers.

Former Reserve Bank of Australia chairman
Bernie Fraser
was last week re-elected ME Bank chairman for another three-year term. Two new non-executive directors with commercial banking experience are expected to be appointed shortly.